The three major stock indies couldn't have been any flatter yesterday as the Dow gained 5-points (+0.03%), the S&P 500 added 9 cents (+0.00%), and the Nasdaq was up 1.90 (+0.03%). It took some buying into the close to get there as they were all slightly negative for most of the trading day. That's the good news.
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There was some rumblings about more trouble in China yesterday as investors are looking hard to try to find something to be worried about, and that's been difficult recently. The headlines were something like this... "China credit squeeze dents global growth." Whether this turns into anything remains to be seen, but the ETF chart of China's large cap index looks to be forming a "toppy" looking head and shoulders pattern.
The other problem out there is, and again we're grasping at straws because the news has been very good lately, if you threw a stone into a crown on Wall Street, your chances of hitting a bear are very slim. Everyone seems to be bullish, and that can be a little concerning since most of them are likely fully invested already. And that may be reflected in the VIX which remains below 10. However, the problem for those trying to call a top is that they continue to get run over by the bulls.
The S&P 500 / C-fund tapped the March highs near the open on Monday but quickly backed off, although it made its way back near those levels by the close. As I mentioned yesterday, this could be the double top playing out "IF" the April peak was not the double top pullback already. The gaps remain a threat but may have become a distant memory for some.
The DWCPF (S-fund) traded down to the Friday lows before rebounding a little bit on Monday, but still closed with a stiff half percent loss on the day. There is some descending resistance trying to flex its muscle, but that powerful reversal last week at the 50-day EMA may be a place where the bulls made their stand and will be buyers again should it be tested again.
The Dow Transportation Index is the one that looks a little shaky. Not only is it still in a large bear flag, but it lagged badly on Monday with a 1.06% loss and nearly broke down from the smaller bear flag. Should that break I'd expect to see a test of the bottom of the larger flag soon.
The AGG (Bonds / F-fund) was down fairly sharply as the bear flag continues to break down.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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